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Ofcom Proposes Broadband Price Reductions

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Ofcom has announced that it will be recommending a price reduction which could lead to as much as a ten percent price reduction in home telephone and broadband costs for some users.

The proposed cuts come as a result of Ofcom revising the rates that Openreach, which manages BT’s network, should charge other providers such as TalkTalk and Sky who rent BT lines and exchanges. While it will be good news for some customers, Virgin customers won’t see a cut in prices as it uses its own network to provide telephone and broadband. Ofcom has announced that there will be two ways by which the cost reductions will be passed on to the customer. The first is called Local Loop Unbundling, and allows BT's competitors to place their own equipment in local BT exchanges.

Ofcom is proposed that Openreach reduce prices when an operator takes over the lines completely by between 1.2 and 4.2 percent every year. Where lines are shared it wants prices to drop by between 11.6 and 14.6 percent every year. The second area where it is recommending price reduction is Wholesale Line Rental, which involves telecoms firms simply renting lines from Openreach. Ofcom wants the prices of these to drop by between 3.1 and 6.1 percent every year.

In a statement the regulator said: "Ofcom expects its proposed prices to lead to real term price reductions for consumers, as communications providers pass on savings to their landline and broadband customers." Responding to the proposals, BT said: “BT invests more than any other company in the UK's communications infrastructure, so it is critical that it is able to achieve a fair rate of return in order to continue its investment in copper and fibre-based services."

The consultation phase of the process will now continue until June 9 with results being published this autumn. Should the recommendations go ahead customers could see price reductions as soon as the end of the year.

Source: Ofcom and BBC

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